The Competition Act, 2002 was enacted by the Government of India to promote and sustain fair competition in the market. It replaced the earlier Monopolies and Restrictive Trade Practices Act (MRTP), 1969, which had become outdated in the context of economic liberalization.
Objectives of the Competition Act, 2002
The core objective of the Act is to ensure free and fair competition in the Indian market. Its main goals include:
1. Prevent Practices Having Adverse Effect on Competition
The Act prohibits anti-competitive agreements and abuse of dominant position to ensure that no entity distorts fair competition.
2. Promote and Sustain Competition
It aims to encourage firms to compete fairly, innovate, and provide better choices to consumers.
3. Protect the Interests of Consumers
By eliminating unfair trade practices, the Act helps ensure consumers have access to a variety of goods and services at reasonable prices.
4. Ensure Freedom of Trade
The law protects the rights of businesses to operate without unfair restrictions imposed by other market participants.
Main Provisions of the Competition Act, 2002
The Act is applicable to all industries and sectors in India (except where specifically exempted), and covers individuals, companies, and government undertakings.
a. Anti-Competitive Agreements (Section 3)
This section prohibits agreements that:
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Directly or indirectly determine purchase or sale prices
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Limit or control production, supply, or markets
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Share the market or source of production
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Result in bid rigging or collusive bidding
Example: If two rival telecom companies agree not to undercut each other's prices, such an agreement is anti-competitive and void.
Horizontal agreements (between competitors) are presumed to be anti-competitive.
Vertical agreements (between different levels of production/supply chain) are reviewed on a case-by-case basis.
b. Abuse of Dominant Position (Section 4)
A dominant firm is one that can operate independently of competitive forces or affect competitors unfairly. Abuse occurs when such a firm:
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Imposes unfair conditions or prices
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Limits production or market access
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Denies market access to competitors
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Uses its dominance in one market to enter another
Example: A dominant e-commerce platform forcing sellers to use only its logistics service may be abusing its position.
c. Regulation of Combinations (Section 5 and 6)
The Act regulates mergers, acquisitions, and amalgamations that may cause an appreciable adverse effect on competition in India.
A combination is reviewed if:
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The combined assets or turnover of the parties cross a specified threshold
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It may result in market concentration or harm competition
Firms must notify the Competition Commission of India (CCI) before entering into such combinations.
d. Establishment of the Competition Commission of India (CCI)
The CCI is the regulatory authority under the Act.
Functions of CCI:
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Investigate anti-competitive practices
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Pass cease and desist orders
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Impose penalties
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Approve or block mergers and acquisitions
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Promote competition advocacy and awareness
The CCI can act on:
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Complaints from consumers or competitors
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References from government bodies
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Suo moto (on its own initiative)
e. Competition Advocacy (Section 49)
The Act mandates the CCI to engage in competition advocacy, which includes:
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Spreading awareness about the benefits of competition
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Advising central and state governments on competition policy
f. Penalties and Enforcement
Violations of the Competition Act can attract:
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Fines (up to 10% of average turnover or 3 times the profit)
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Cease and desist orders
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Division of dominant enterprises
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Criminal sanctions for non-cooperation in investigations
Exemptions
The Central Government may exempt:
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Public interest activities (e.g., defence production)
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Certain agreements in the agricultural sector
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Statutory bodies and sovereign functions
Conclusion
The Competition Act, 2002 plays a critical role in maintaining a healthy market environment by discouraging anti-competitive behavior and protecting consumer welfare. It empowers the Competition Commission of India to ensure that markets remain open, dynamic, and innovation-friendly.